The Broncos signed Henry to a five-year, $22.5 million contract in March 2007. He was hampered by injuries in his only season in Denver, rushing for 691 yards on 167 carries with four touchdowns.
Henry injured a hamstring while running 100-yard sprints late last month.
The NFL told him in September he had failed a test for marijuana and would be suspended for a year, but he challenged the test and the punishment and won.
Before joining the Broncos, Henry played for Tennessee and Buffalo.
"We did not feel his commitment to the Broncos was enough to warrant a spot on this football team," coach Mike Shanahan said in a written statement. "Although Travis has the ability to be one of the top running backs in the NFL, we have to make decisions that are in the best interests of our organization and its goal of winning a Super Bowl."